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Money Market Fund AUM Swells Further. RRP In Focus
Money market fund assets ballooned by another $61.7 billion over the latest reporting period, data released late Thursday in the US showed.
It was the second consecutive outsized weekly haul and the seventh straight overall.
Since shedding $98 billion during tax-related redemptions in mid-October (the largest single-week outflow since Lehman), money fund assets have grown by more than $290 billion. That, during a stretch when virtually all other assets performed exceptionally well.
As usual
I spent 1970 to 1973 at Chemical Bank with my ABD PhD in statistical intl poli sci in the bowels of Chemical Bank trying to figure out what the blank was going on in the bank’s monetary cashflows. We American banks got consistently raped by the non-US banks. It was the U.S. regs that did it and it was Bretton Woods plus Vietnam that were the proximate causes. The arb was quite simple but disastrous for the U.S. banks. Nixon saved the country back then but looking at all the crap (that is a technical term) regulates us now, since 2008, it is just like 1970.
The SOFR could be going crazy in the next 2 months like it did in the fall of 2019, but something bigger will probably break before then . The RRP and the BTFP (a stupid bandaid) are allowing the liquidity squeeze implied by the post-June STIRS increase to be finessed. However, how low can the RRP number go? – certainly not to zero. Maybe we are there now and that is why there was a twitch in the SOFR. As reserves get tighter we could find the regulatory boundaries that exist within the massive assets – remembering that all dollars are not U.S. dollars. It is very different now, but in 1970 that tripped us up. No matter what RRP is on its way out.